Glove manufacturers make hay out of pandemic

WHILE a pandemic is a bane for a country’s economy and the well-being of its people, it has been a boon for glove manufacturers particularly Malaysian companies which holds 65% share of the global gloves market.

Since the outbreak of Covid-19 virus began early this year, domestic and global demand for medical gloves have spiked as public hygiene becomes a concern and require the use of protective gears.

This is boosted by the need for more protective gears supply for medical personnel who are the front liners in the battle against the dreaded disease.

Such scenario has led to glove manufactures ramping up their production which resulted in increased revenue and profit, hence surge in their share prices.

Supermax Corp Bhd’s net profit soared to RM535.6 mil in the year ended June 30, 2020, from RM123.1 mil in 2019.

The company said the higher profits were fuelled mainly by exponential rise in demand for medical gloves and other personal protective equipment

Hartalega Holdings Bhd reported a 134% jump in net profit for first quarter ended June 30, 2020 (1QFY20) to RM219.72 mil, from RM94.06 mil a year earlier.

Top Glove Corp Bhd’s net profit surged to an all-time high of RM1.29 bil in the fourth quarter ended Aug 31, 2020 from RM74.17 mil in the same quarter a year ago on the back of increased demand.

Meanwhile, Kossan Rubber Industries Bhd’s net profit for the second quarter ended June 30, 2020 (Q2 2020) jumped 135 per cent to RM131.1 mil from RM55.88 mil in the same period a year ago.

It said gloves division’s revenue increased 28.83% to RM630.57 mil in Q2 2020 from RM489.45 mil in Q2 2019 due to higher volume sold at 21.1% and better average selling price.

The South China Morning Post in a July 2020 reported, Top Glove Corp shares was up 389% in Kuala Lumpur this year, the most on the MSCI Asia-Pacific Index, while Supermax Corp has leapt more than 1,000% due to the boom in glove demand due to the coronavirus pandemic.

On Sept 13, the edge markets reported that since March up to mid-August, seven Malaysian companies namely Top Glove, Hartalega, Supermax, Kossan Rubber, Careplus Group, Rubberex and Comfort Gloves have seen RM80 bil being poured into the stock market.

In terms of market capitalisation, Top Glove stood at RM62.97 bil, Hartalega (RM42.64 bil), Supermax (RM19.33 bil), Kossan Rubber (RM13.66 bil), Comfort glove (RM2.14 bil), Rubberex (RM1.46 bil) and Careplus (RM1.36 bil), the report stated.

“Glove counters have been oversold over the past week. In the coming week, we foresee that demand for glove stock will be on the rise, indicating a healthy correction,” the financial news portal quoted Rakuten Trade Sdn Bhd research vice-president Vincent Low as saying.

“We believe that glove companies are an asset to invest in as the pandemic will create a new norm, leaving demand for glove on a steady note,” an analyst reportedly told the edge markets.

The rise of glove manufacturers as beneficiaries of a pandemic is nothing new.

According to a Bloomberg report, Top Glove executive chairman and founder Lim Wee Chai has said pandemics such as SARS, H1N1, bird flu and swine flu resulted in big surge in orders and demand for gloves.

The same was the case for its rivals, the news agency said.

This backs a Focus Malaysia report Sept 17-23, 2016 issue that highlighted glove manu­facturers saw a share price rally despite higher raw material costs mainly due to market anticipation of heightened demand following Zika outbreak then.

As per the article, major glove manufacturers such as Top Glove Corporation Bhd, Kossan Rubber Industries Bhd, Supermax Cor­poration Bhd and Hartalega Holdings Bhd registered a spike in their share prices from late August to early Sept 2016.

Kossan senior manager of corporate affairs Edward Yip reportedly said: “The recent share price rally of glove companies is probably due to market sentiments on the Zika outbreak in the last few months in Singapore and in Malaysia.”   – Oct 13, 2020

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